by Rod Drury, Chief Executive Officer of Xero
Succession planning is critical to the ongoing health and longevity of a company.
This week, our succession plans were put to the test with the unexpected announcement that our Chairman, Chris Liddell, was leaving to take up a role in the White House.
Change happens fast
With little notice, we were able to quickly manage what could have been a significant hit to our governance structure, all without missing a beat. Successfully managing such an important and visible change demonstrated the importance of continuously looking to the future and scenario planning for unexpected changes, so we are prepared for sudden exits, accidents or to seize opportunities.
We were officially notified of Chris’s new role on Wednesday, when the announcement was made by the Office of the President-Elect. By Thursday, we had convened a board meeting, talked through our options, made a decision and announced to the stock exchange that Graham Smith, long-serving Xero Board member, would step into the Chairman position.
For us, we are constantly thinking about succession, even at the board level. In this situation, our plan was for Graham to step into Chris’s role when he eventually retired or should a situation arise prior. At these times, we assess the combination of expertise and experience of our Board of Directors and make appointments to complement the team as a whole.
Building the plan
Over the last year, under our Chief People Officer, Rachael Powell, we’ve ensured that all our senior leaders have succession plans within their teams. It’s up to them to grow their people into positions to eventually take over their roles. At Xero, we formalized our succession planning framework so that our People Experience team work with senior leaders explicitly on succession. This ensures that we are regularly reviewing talent, planning for contingencies and growth, while providing the development and learning opportunities aligned with our people’s aspirations.
It was interesting to explicitly have the conversation with key people of ‘what happens if you can’t turn up to work tomorrow?’ Often it’s just not talked about but having that conversation was very healthy, and all of our team quickly embraced the concept of identifying successors.
We also insist our people take breaks. It’s a great test for the business if key people can be out of the office, and off email, for a few days or weeks and it continues to run smoothly. Even I do it. I often think, ‘who is the person I’d be most concerned about not being here?’ and ensuring that person takes some leave so we know they have the team to cover themselves.
The smoothness of the transition shows just how deep our leadership bench is and how to adapt our teams are with making the calls needed to keep the business forging ahead.
I’m not exempt from any of this. Succession planning for Founder-CEO’s is always a challenge. I look to ensure we have possible board members and senior executives that could step into my shoes with little notice. I often pass public opportunities to our leaders, so they are building their profiles in the market. This helps our external stakeholders get to know how deep our bench is and enables them to get comfortable with Xero’s leadership team. I get so much pride seeing our people acknowledged as industry leaders and I get to do the things I enjoy the most.
Developing leaders
The succession plans that we have in place are combined with a key emphasis on leadership development. We actively develop potential leaders rather than just compile a list of employees that we see potential in. For example, succession is an opportunity for our emerging talent to benefit from international experience. We regularly relocate emerging leaders in the company to gain international experience and step into roles to strengthen local teams, while building milestones in their careers. This becomes even more critical as we scale globally and want to ensure we maintain the unique culture that Xero is known for.
We look to create skill overlaps in our management team, so if anything happens it may not be a single person that fills the void, but the responsibility is shared between multiple people. This approach also encourages ambidextrous managers that can operate in a variety of roles which further builds a deep, resilient bench.
Cross-functional teams are another way we develop our people. This naturally results in the cross fertilization of roles and usually sparks diversity of thought and energizes people to leverage their strengths and do the best work of their lives. People who are happy and learning in their roles do their best work and are loyal ambassadors of our brand.
However, for talent management and succession planning to be successful, it needs to be linked to longer term business strategy so that we clearly know what we will require of our future leaders and then we actively identify and develop them in line with this. While we always look internally first, to complement our internal succession planning, we have invested in an internal research team who continuously map the market and pipeline, not only to ensure our succession planning is benchmarked against external talent, but also to unearth people who are culturally compatible with Xero.
A well-managed succession example was when now Xero Australia Managing Director Trent Innes stepped into Chris Ridd’s shoes early last year. Chris had built Xero Australia from a team of half a dozen people to a few hundred by the end of 2015. Trent worked alongside Chris over this time as the Australian Sales Director, and with this depth of experience, his transition into leading the Australian team was seamless. With the business continuing to go from strength-to-strength.
Succession, a key part of HR
As CEO and founder, I’m always thinking about our talent pipeline from the Board level right down to technical talent. Hiring amazing people has always been Xero’s special sauce. To do this, I focus on building my network, attend industry events, monitor news feeds and social for emerging leaders and talk to colleagues to see who’s hot on their candidate list.
At Xero we want people to have a life-long career. If we’re able to build career progression plans into every role, we can build high-performance, cross-functional teams with deep institutional knowledge. We can also help support employees’ career aspirations, keeping them inspired and flourishing, all-the-while reducing attrition and the knowledge and monetary costs that come with good people leaving the company. Succession planning is a key part of an integrated People Experience process that builds opportunities for our people.
With more than 1,600 staff my top priority is to ensure every person at Xero feels valued and is given the resources they need to do their best work. If our people are thriving, so too will the business, which ensures our customers’ too can be delighted.
About the Author: Rod Drury is the founder and CEO of Xero, the leading international cloud accounting solution for small business. Rod was 2013 EY New Zealand Entrepreneur of the Year, NZ Herald Business Leader of the Year in 2012, member of the NZ Hi-Tech Hall of Fame, NZ Hi-Tech Entrepreneur of the Year in 2006 and 2007, World Class New Zealander for ICT in 2008, and Honorary Fellow of the Institute of IT Professionals NZ. Connect with Rod on Twitter.